Top 20 Wealthiest Landowners 2002

Everything old is new again

November, 2002

Everything old is new again. This seems to be the theme for this year’s list of Top 20 Wealthiest Landowners. Hawaii’s old powerhouses – comprised of Alii trusts Kamehameha Schools (No. 1), Queen’s Health Systems (No. 2) and the Queen Liliuokalani Trust (No. 6) – have forged a new bond. And two of them are in the process of reinventing themselves.

General Growth Properties (NSYE: GGP), which is the owner of Ala Moana Shopping Center, has burgeoned into the state’s third-wealthiest owner, after swallowing up long-time local landowner Victoria Ward Ltd. The former chief executive officer of Victoria Ward, Mitch D’Olier, moved across the Pali Highway to head up operations for Kaneohe Ranch Ltd., which is the management arm of the Castle Family Limited Partnership (No. 17).

The last of the Big Five companies, conglomerate Alexander & Baldwin Inc. (NASD: ALEX) at No. 13, is determined to be the “most successful” real estate company in Hawaii and has become increasingly active in the market. The Estate of James Campbell (No. 9) is remaking itself into a commercial entity. And some new faces (with old family ties) have appeared farther down the list.

Growth and Change
There are two new additions and two deletions to this year’s list of Top 20 Wealthiest Landowners. The $250 million acquisition of Victoria Ward Ltd. by General Growth Properties, propelled GGP from No. 6 to No. 3 on the list and eliminated Victoria Ward. General Growth’s properties in Hawaii have a total 2001 tax assessed value of more than $1 billion. A huge, national Real Estate Investment Trust (REIT), General Growth’s executives have major, long-term plans for their new property (see “Big General Growth” on page 28).

Mitsui Fudosan Co. Ltd. fell from the No.20 spot last year with the sale of the Amfac Center, which is now the Topa Financial Center.

New to the list this year are Transcontinental Development (Hawaii) Co. (No. 19) and the Steiner Family Ltd. Partnership (No. 20). Transcontinental’s holdings had a total 2001 tax assessed value of $262 million; the Steiner Family Ltd. Partnership wraps up the list with a $215 million tax assessed value.

Transcontinental’s holdings in Hawaii are comprised of several joint ventures and partnerships with various entities. Its prominent properties include Waikoloa Development, Waikoloa Beach, Kings’ and Village Golf Courses and Kings’ Shops. Its Hawaii officers include President Ronald Boeddeker and Vice President Thos Rohr. Its parent company is Transcontinental Corp. Inc. of Santa Barbara, Calif. Owners Sid and Lee Bass of Texas are the developers of the Lake Las Vegas Resort.

The descendents of James Steiner, a Waikiki pioneer and entrepreneur, have become active managers of the two high-value acres he left in trust (see “Waikiki Pioneers” on page 29). Steiner family members own land under the Hyatt Regency Waikiki. That land is being leased long-term to Azabu Building Co. The Steiner family also owns the Education America Building and the land on which it sits, at 1111 Bishop St.

Allied Alii
There’s a fresh sense of urgency at the new Pacific Guardian Center offices of the Queen Liliuokalani Trust (QLT). Perhaps some of it stems from a perceived “attack” on the trust by proponents of the Honolulu City Council’s stymied Bill 53. The bill would have significantly lowered the threshold to trigger mandatory lease to fee property conversion (See “This Land is Your Land” on page 27).

QLT Chairman Thomas Kaulukukui Jr. says, “When manmade law diverges from that which is sacred, you can let it happen or you can say, ‘No,’ and the Hawaiian people are saying, ‘No.’ That’s why we’re going to win. No matter what happens or what the courts decide or what the city council passes, at this stage, I have a very clear feeling the Hawaiian people will uphold the sacred law. They’ll die in the streets if they have to, to uphold the sacred law.”

In August, longtime managing trustee First Hawaiian Bank voluntarily withdrew, and former First Circuit Court Judge Patrick Yim, a part-Hawaiian, was appointed to the QLT board of trustees to serve with David Peters and Kaulukukui. The change came about after the group consulted withkupuna(elders) in the Hawaiian community. That was at the suggestion of Walter Dods, the chairman and chief executive officer of First Hawaiian’s parent company BancWest Corp.

Kaulukukui says, “The bank decided, ‘OK, we recognize your desire to make your own policy decisions. We also recognize your competency to handle your own management and, therefore, agree that it would step aside and make way for a Hawaiian trustee and our own self-management.’

“I think that’s historic,” he continues. “And I think it’s thinking that recognizes that, in these times, we’re in times of empowerment, not in times of stewardship.”

QLT trustees have hired former Amfac Inc. and Queen’s Health Systems executive Robert Ozaki as their trust administrator. Ozaki says, “I think you are going to see the Alii Trusts become increasingly important. What I see, as someone who grew up here, is more and more of our businesses are controlled outside of the state. … As that happens, as we move forward as a community, I think institutions like the Aliii Trusts become more important to preserving some of our cultural values and who we are as a people. That’s one of the reasons I came here.”

Ozaki says they are in the process of coming up with a strategic land plan for every one of the trust’s properties, totaling more than 6,000 acres. The bulk of land is in Kona. “You’ll see a much more active trust in terms of how it’s going to manage its assets,” he says. “The more income we can get, the more people we can serve and that’s the bottom line for us.”

Along with a renewed sense of purpose, the trust also seems to have found a new sense of kinship with its “sisters” Kamehameha Schools (No. 1) and Queen’s Health Systems (No. 2). In September, the Alii Trusts announced the formation of Na Ahu‘ula, or The Royal Cloaks, an association born a couple of years ago. It recognizes the relationship between the various trusts’ missions and Alii (royal) relationship of the trusts’ creators.

Douglas Ing, chairman of the board of trustees for the state’s largest and wealthiest landowner, Kamehameha Schools, says, “If we can’t work together as trusts from the Alii, we won’t be successful in improving the welfare and well-being of the Hawaiian people.”

Sanford Murata, Kamehameha Schools’ new director of the commercial assets division says there has been a significant change in the trust’s land strategy. “The strategy today at Kamehameha Schools is to think from a large, holistic point of view and the big picture,” he says. “We look at our holdings, real estate or non-real estate, from a long term point of view in terms of a cohesive investment strategy.” He says he is employing a new type of residual land value analysis when looking at projects. The estate has been working with communities to plan for Kakaako (50 acres), Moiliili near the University of Hawaii (seven acres) and Waikiki (five acres).

QLT’s Kaulukukui says times have changed since the days of the Big Five corporations. He says, “Now you are talking about the big two or three and they are the Hawaiian trusts. We have the most land … developers want to develop with us. Nobody else has money to build. Investors want our money. We have to move with those times.”

At the time of this writing, the Na Ahu‘ula’s articles of association had not yet been presented to the Queen’s Health Systems board for approval.

High Hopes
The chief executive officer of Hawaii’s last Big Five company, Alexander & Baldwin Inc. (No. 13), is downright bullish on Hawaii real estate. “We certainly are acting as if we have large aspirations and we’ve done very well in our real estate activity,” W. Allen Doane says, pointing to 14 Hawaii acquisitions over the past several years. A&B’s more than 90,000 acres statewide include the Kukui Ula resort development project on Kauai and a fee-simple residential condominium tower in the planning stages for Waikiki, which Doane jokingly calls, “The Doane Tower.”

Stan Kuriyama, chief executive officer for the company’s real estate subsidiary A&B Properties Inc., says, “I think it’s pretty clear that we are and have been the most active real estate investor in the state.”

Doane adds, “Because we’re very conservative in how the company’s capitalized, we have the ability to invest in the longer run, compared to maybe some other people who don’t have such a well-capitalized company. That may be more of a distinguishing characteristic that we can invest in the long run.”

Family Business
Big changes are afoot for the 102-year-old Estate of James Campbell (No. 9) with more than 61,000 acres statewide (including the City of Kapolei) with a total assessed value of $763 million. The Estate recently filed a termination plan with the court outlining how it plans to divide up a projected $2.3 billion in assets by 2007.

Of the expected 31 beneficiaries in 2007, 27 prefer to receive most of their cut as shares in a successor entity, called the James Campbell Co. LLC in the filing. Three beneficiaries want cash, and one (reported to be former Campbell Estate Trustee Fred Trotter) would like real estate. Quentin Kawananakoa, president of Kulia Ka Ohana, an educational organization for Campbell family members, says he’s upset with reports that the family has turned its back on Hawaii, because the estate now holds lucrative real estate in 16 states. Says Kawananakoa: “It kind of hurts me to hear that people think we’re abandoning Hawaii. … We’re not going to hold on to everything just for the sake of holding Hawaii property. We have to be business-wise in our efforts, but at the same time be reasoned and balanced in how we go about our business practice with a sense of island aloha here. The ongoing entity will be based here in Hawaii. It’s part of our business plan. One of the requirements is that the main office, brick and mortar, be here in Hawaii, so we’re not leaving.”

Who’s Got the Power?
Talk to any large landowner today, and they’ll maintain that land is not the basis for power the way it was 20 years ago. But if land is not the root of power these days, it certainly is still a component of it.

A&B’s Kuriyama says, “There’s been a pretty major change in the landscape. While certainly real estate is the basis and source of income for people, it’s certainly not the source of power.”

Murata of Kamehameha Schools says: “The power of the land, at least in Kamehameha’s point of view, is to be responsible community builders, where instead of using power for the furtherance of a political initiative, we use power in a good way. We use power in the right way in terms of building communities.”

QLT’s Ozaki adds, “I think the days of quote – land and power and the old boys or whatever people think it is – I think those days are gone. I think the power’s in the people, and I think that’s where it should be.”